Korea exports post biggest gain since 1988 as world reopens

South Korea’s exports surged the most since 1988 in May as a reopening of overseas economies boosted demand for products manufactured by the Asian nation.

Overseas shipments increased 45.6% from a year earlier, the trade ministry said Tuesday, compared with economists’ forecasts for a 48.9% increase. Exports to China rose 22.7% while total semiconductor shipments increased 24.5%.

While export growth was in part inflated by last year’s 24% plunge, the outsized gains reinforce the view that global commerce is recovering from the pandemic and fueling Korea’s economic expansion. Increased vaccinations in major economies like the U.S. have allowed business regulations to be further relaxed and bolstered consumer confidence.

Key Insight

• South Korea’s exports are seen as a barometer of global demand as the country is home to world-renowned manufacturers for chips, cars and smartphones.
• Exports are key to achieving the Bank of Korea’s forecast of 4% economic growth this year as they help fuel investment and buoy confidence. Korea’s consumption is also rebounding, which would make the recovery more balanced.
• A global chip shortage has hurt production at major carmakers including Korea’s Hyundai Motor. Still, the crunch helps boost prices for certain types of Korean semiconductors, and the government has recently laid out a long-term plan to create a production cluster to prevent future shortages.
• The latest data from China showed the country’s manufacturing recovery may have peaked, with soaring input prices weighing on small factories. Korea’s export data will shed further light on Asia’s manufacturing momentum amid surging commodity prices.

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• Total automobile shipments jumped 93.7% in May from a year earlier, while exports of oil products rose 164.1%.
• Overall exports to the U.S. rose 62.8%, while those to Japan increased 32.1% and to the European Union were up 62.8%.
• Overall imports rose 37.9% from a year earlier, leaving a trade surplus of $2.93 billion.